How the climate change crisis impacts your insurance
Climate change has led to an increase in severe weather events, affecting all aspects of life. From our homes and jobs to our health, there's no precise way to measure the true ramifications. However, we do have some idea of what might be affected. Our insurance is one of those things.
Climate change can pose a problem for the insurance industry in several ways. Firstly, there may be an increase in costly claims for property damage following major weather events. Secondly, insurers are now required to invest dollars in pools for claims coverage and future pensions.
Here's how climate change could impact your insurance -
House, tenant and condo
We've already seen the ramifications of climate change in our home insurance rates. Across Canada, they're steadily rising due to the increasing frequency of extreme weather events, including wildfires, floods, and massive hailstorms. There's evidence suggesting Canada could even be warming faster than many other countries in the world. This could lead to more wildfires, smog, droughts, and other events that could damage infrastructure, businesses—and our homes.
Although condo tenants and owners are not required to cover the physical structure of their property, they may still be at risk with this change. Floods and fires can still destroy our valuables or cause irreversible damage. According to the Insurance Bureau of Canada Between 2009 and 2020, the country's insurance companies spent an average of $2 billion per year on losses due to natural disasters.
Separate climate change insurance is not an option to add to your home insurance, which may mean that the increased risk will be reflected in property insurance and tenant/condo rates.
Automobile
Rainfall is increasing, as are temperatures, creating a bad combination for flood season. Extreme weather conditions are just as dangerous for our infrastructure and homes as they are for our cars and can lead to costly auto repairs. To mitigate this risk, drivers may want to review their insurance coverage and consider both the types of extreme weather conditions they might encounter in their geographic area and the total value of their car. Additional coverage may be forgone if there isn't a significant difference between the amount the driver pays for the coverage and deductible and the vehicle's total cash surrender value.
Life
The future is uncertain, and there is no way to say for sure what ramifications the climate crisis might have on life insurance in the coming years. However, there may be longer-term impacts related to population growth and food insecurity, which could negatively influence diets. One might expect this to alter mortality rates. Conversely, these dire circumstances could force individuals to take the opposite approach. Plant-based diets have been shown to have less of an environmental impact and, in their whole-food form, are lower in calories. This could therefore lead to lower rates of heart disease, diabetes, and other serious illnesses.
For insurers, identifying the risks that may accompany the evolution of climate change is paramount. Beyond what is currently considered a liability, many insurers will be examining how climate change may lead to future liabilities, which could affect the cost of life insurance policies in the longer term.
Conclusion -
To mitigate the impact of climate change on our insurance, we can take preventative measures to ensure we maintain the lowest possible rates. These measures may include:
- Consolidate multiple insurance policies through a single provider
- Implementation of approved alarm/security systems
- To be claim-free for more than 3 years
- Opt for public transport over driving whenever possible – or cycling/walking to maintain our cardiovascular health
- Increase our franchise
- Repairing minor damage ourselves
- Shop around for more affordable options here and there
- Speak with your broker or insurance specialist for advice
It can be frustrating to see your premiums increase even if you think you haven't taken any risks. It's a good idea to do your own research, compare rates from several insurers, and talk to your broker if you have any concerns.